June 17, 2021

Bodyweight Blueprint

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Profile of Jason Karp Hedge-Fund Star to Healthy-Food CEO at HumanCo

13 min read
Profile of Jason Karp Hedge-Fund Star to Healthy-Food CEO at HumanCo
  • Jason Karp managed billions as the founder of the hedge fund Tourbillon.
  • But he left it all behind to get into a totally different business: building healthy-food brands.
  • Karp said an illness, disillusion with finance, and a side project persuaded him to change careers.
  • See more stories on Insider’s business page.

On a spring day in 2018, Jason Karp paid a visit to Kern Valley State Prison, a maximum-security facility in California’s Central Valley. 

Karp was the founder of Tourbillon Capital Partners, an award-winning hedge fund that managed more than $4 billion. Traveling with a few others from the business world to Kern Valley as part of a volunteer program, he met with inmates, counseling them on entrepreneurship and offering advice on how to make the most of their lives behind bars. 

But despite his success, Karp himself was grappling with how to make his life meaningful.

After Karp’s two decades in the finance world, generating returns was getting harder, and Karp found himself struggling to find the drive to beat his ultracompetitive hedge-fund peers. Instead, he was more interested in the food world, having started an organic chocolate brand and heavily investing in the food and wellness space. He also believed he had transformed his own health with diet after a devastating health diagnosis.

The trip had an impact on Karp, he told Insider in a recent interview. The inmates the group met were serving long sentences, and many were unlikely to return to life as free people. 

Hearing from the inmates forced Karp to question whether he was making the most of his life as a free man. “I don’t know how long I’m going to live, but if I have another 40 years left, I want it to be meaningful, and I really want to help people,” he added.

Tim Ferriss, the entrepreneur and early-stage startup investor best known for his “4-Hour Workweek” philosophy was also on the Kern Valley trip. “My interpretation was that he was in a transition period and was pursuing a lot of deep reflection on his life,” Ferriss said. “I think that it actually overlapped and folded into a lot of the conversations that we were having and the testimonies that we were hearing from the inmates.”

Later that year, Karp would shutter Tourbillon and leave the hedge-fund world behind. Instead of working with derivatives and delivering alpha, his next move would involve making plant-based cream cheese and separating diet fads from long-term trends in the food industry.

Like his career before, his new venture, HumanCo, would not have modest ambitions. He’s aiming to create the next big food conglomerate, a challenger to big food companies like Unilever and Coca-Cola, but with healthier options. And he’s looking to have a direct impact on the world, he says, in a way that managing a hedge fund never provided. While still in its early innings, HumanCo has already raised hundreds of millions to acquire small, up-and-coming food brands.

A hedge-fund legacy 

Like many of the world’s top stock pickers, Karp’s story begins at the Wharton School, where he played squash for the Ivy League school.

While hedge funds now are considered a prestigious landing spot for young finance grads, when Karp was starting out in 1998, the industry was still somewhat obscure — a risky career bet compared to investment banks.

He went against conventional wisdom though, choosing George Weiss’ eponymous hedge fund over a job at the established investment bank DLJ. His first role working for Weiss, who is still the CEO of 44-year-old firm, was as a quant, even though he had no true training in the nascent discipline in which humans would build models and algorithms for computers to trade off of.

“I’ve always sort of had a very deep curiosity for things and never felt intimidated by diving into waters that other people would probably be afraid to,” Karp said of starting his career in a field he didn’t initially know much about.

His career was gaining steam as he rose the ranks at Weiss, but his health — which had been a source of pride as a Division I athlete — was deteriorating. Doctors told him he had several autoimmune diseases that could not be cured, only treated with an aggressive routine of prescription drugs. His eyes were failing, and he was soon diagnosed with a degenerative eye disease that doctors said would leave him blind at 30.

“Despite having achieved superficial measures of ‘success,’ I was sick and very depressed for over a year,” he wrote years later when describing his time at Weiss. 

But a radical diet change — he now eats only gluten-free and organic foods – substantially improved his conditions, he said. He credits the lifestyle change to saving his eyesight, saying the “harrowing journey instilled in me a lifelong passion of focusing on nutrition.”

With his health under control, he continued his rise as one of investing’s brightest young stars. He left Weiss in 2005 after rising to the rank of partner and portfolio manager to join the marquee fund of the mid-2000s: SAC Capital, run by the billionaire and future New York Mets owner Steve Cohen.

As a portfolio manager and director of research at SAC, Karp developed a legacy that was not just his own work but also that of the people he brought in. He recruited and developed talent using a system that many in the industry now emulate, several industry sources told Insider.

Under Karp’s direction at SAC, analysts got in the habit of updating their portfolio managers on Sunday nights on the companies they monitor, allowing investment teams to hit the ground running when the week started.

“What’s much more commonplace now was not standardized back then, and, to be fair, I think Jason pioneered a lot of that,” one person who worked with Karp said. 

This more standardized process, and understanding of what type of work is expected from each role, has allowed the hedge-fund industry to become more institutionalized and grow to never-before-seen sizes. For example, Cohen has dozens of portfolio managers and hundreds of analysts working at his new hedge fund, Point72. The giants of the industry, like Ken Griffin’s Citadel and Izzy Englander’s Millennium, have massive rosters of investors trading across asset classes and geographies.

Later at Tourbillon, Karp found personality tests were almost just as important as technical skills for senior hires. The final step in the hiring process would include a background check with a former CIA interrogator to determine whether candidates were the best fit for the role.

While the CIA interrogator is a little too pricey for HumanCo, Karp said he still does “extensive personality testing” to understand how to best manage certain people. 

“Everybody’s wired differently, and some people need to be managed in different ways,” he said. “And I think having that is really helpful in knowing before you start really working with them, like this person needs very explicit feedback, very specific tasks and goals, whereas this person is more of a maverick.

‘A lot of introspection’

Karp had a nearly unprecedented run to start his career in finance: He hardly ever lost.

After four years working for Cohen and then three years at Clint Carlson’s eponymous fund, where he was the co-chief investment officer, Karp started trading at his own fund, Tourbillon, in early 2013 with $250 million in assets and immediately had success. Running his own firm for the first time, he was able to build a culture from the ground up, and several people who worked for him at the time recalled an intense focus on personal health being a part of the overall company’s ethos.

Health extended to his projects outside of Tourbillon. It was around this time that he opened Hu Kitchen, which started as a single restaurant selling the sort of healthy food that Karp credited with saving his life. The name ‘Hu’ was based on the brand’s slogan ‘Get back to human.’ “We don’t believe people eat the way humans were meant to eat from an evolutionary perspective,” Karp has said.

His partners in the venture were his wife Jessica and his brother-in-law Jordan Brown, a real estate developer. His detractors were many. “My close friends thought I was crazy,” he said. “It did not seem like a viable business model to a lot of people.” The packaged organic, single-origin chocolates the company became known for were first sold at the restaurant and, in the early days, packaged at Brown’s apartment. 

The pantry in the kitchen at Tourbillon also stocked the sort of healthy foods Karp favored. It looked like a Whole Foods, one former employee said, and another mentioned that there was no soda, and all bottled water was in glass because Karp was concerned about chemicals from plastic bottles leaking into the water.

Word got out that things were done a bit differently at Tourbillon. 

When sell-side analysts from banks would buy the firm breakfast or lunch, they knew “not to order Dominoes or Five Guys for lunch because Jason wouldn’t like it,” a former Tourbillon employee said.

Another person said Karp recommended that people work out in the middle of the day or get away from screens and phone calls if they felt stressed.

“It made you think about yourself and what you needed while you were there,” the person said. 

The results spoke for themselves.

Big years in 2013, 2014, and 2015 led to Karp being named the emerging manager of the year by Institutional Investor — an honor he said he chased the second he started his own firm. By all accounts, he was on his way to hedge-fund-titan status, a worthy addition to the billionaire ranks that have come to rule the hedge-fund industry.

He had begun to invest in the food and wellness space, going long on Whole Foods before it was purchased by Amazon and shorting several of what he calls “Big Food” companies.

The only activist position he ever took in his six years running Tourbillon was in SunOpta, a Canadian natural-foods company that Karp’s fund pushed to sell itself as it had failed to turn into a “thriving business with an attractive public market valuation,” according to a letter Karp sent the company’s management. Eventually the CEO was replaced by an executive from outside the company.

But as 2015 ended, Karp said he felt as if the advantages he had as an investor were beginning to fade. His investing strategy was losing way to large computer-run funds. Funds like his were turning to private markets to juice returns and beat the S&P 500 index. 

Karp said the structure of his fund prevented him from playing in the private markets, and his performance suffered over the next couple of years. According to Reuters, his fund fell by 9%  in 2016 and 14% in 2017 and had about half the assets at its closure in late 2018 as it did at its peak. 

“I had basically never lost money in any calendar year at that point,” he said. “I had to do a lot of introspection.”

Karp found his “sources of advantage were shrinking” and began thinking about what life outside finance and investing would look like. 

At the same time, through the Hu Kitchen, he began noticing “enormous inefficiencies” where a data-driven approach like he had applied at every hedge fund he worked at could make a difference.

But he was a hedge-fund guy. 

“That was my identity. And I was obviously very financially successful at it except for the last two years. I felt very conflicted about how to pivot,” he said. “My heart was really in helping people, and my heart was really in creating things that make an impact.”

He said as much in his goodbye letter to Tourbillon investors in 2018.

Finding the cure to his autoimmune disease in healthy food, he wrote “instilled in me a lifelong passion of focusing on nutrition and how it affects the health and wellness of humanity,”

And he revealed what he was thinking of doing next: “I plan to spend the majority of my time, both professionally and personally, focusing on private and public companies within health and wellness.” 

SoftBank, Berkshire, and Hain

Karp and his cofounders found success with Hu, their upstart chocolate brand, which went on to sell in chains like Whole Foods. The company secured an investment from the Oreo maker Mondelez in 2019 that turned into an acquisition earlier this year valuing Hu at $340 million. 

But that was hardly the extent of his ambitions in the food world. Karp wanted to build his own food company.

At Tourbillon, Karp regularly surveyed companies searching for investment opportunities. He was amazed by how big names like SoftBank and Berkshire Hathaway had been able to build huge portfolios. A third company also caught his attention, though it wasn’t a household name: Hain Celestial Group, maker of Garden of Eatin’ tortilla chips and Celestial Seasonings teas. All three served as inspiration for HumanCo, the health-focused food company he founded in 2019.

Most of Hain’s brands aren’t recognizable among consumers, but Karp said the general idea of having a conglomerate for healthy-food brands made sense to him. “Many of the best health and wellness folks that I’ve met are really good on certain attributes like innovation, and they don’t want to deal with the finance, behind-the-scenes, running-the-business stuff,” he said.

“I liked the idea of having shared resources, and I liked the idea of having multiple brands that speak to different consumers,” Karp added. Companies like Hain, as well as its global peers like Unilever and Nestle, often use single teams for marketing, accounting, and other duties across all of their brands. 

To make it real, Karp looked for people who knew more about the food world than he did. One was Brett Thomas, a cofounder at Cavu Venture Partners, which has invested in up-and-coming food brands including Oatly and Beyond Meat.

Karp and Thomas already knew each other — their wives were childhood friends growing up — but it was only during a dinner at Thomas’ house in Connecticut in 2016 that Karp’s interest in doing more with food became apparent.

Karp struck Thomas as a “fast learner” who had absorbed as much as he could about food and consumer goods, Thomas told Insider. Soon, Thomas said, he was talking with Karp and the HumanCo cofounder Ross Berman about a broader topic: “If you recreated The Coca-Cola Company, how would you build that today, and how would it be different than how it is built currently?”

“We got together plenty of times, having brainstorming sessions,” he said. The idea was to build a modern-day conglomerate like Coke or Unilever.

At HumanCo, Karp is focused on food, but he said that he employs some of the same quant-like focus on data that he and his team might at a hedge fund. His executive team also includes Tourbillon alumnus Amy Zipper, who serves at HumanCo’s chief operating officer, and Berman, a longtime friend who is HumanCo’s president and cofounder.

Karp’s analytical approach convinced Ferris to invest early on in Hu. “I knew that, unlike some CPG companies, that Jason had deal-making experience, familiarity with different types of fundraising, and the dynamics of mergers and acquisitions,” he said. “Quite aside from the product development and operations side, there was someone who understood the dynamics of shepherding a company into growth and

liquidity
. That gave me a degree of confidence.”

One recent example is clear in his approach or reproach to the

keto diet
, which involves consuming lots of fat but limiting carbohydrates. 

“Everyone around me who were investors was like, ‘Oh, you’ve got to invest in keto,'” he said. “At the time, anything that said ‘sugar-free’ or anything that was keto was going bananas.”

But Karp said the diet seemed restrictive and suspected that few people were able to stick with it. Looking at surveys on how long consumers were able to stay on the diet and how they felt about it, he didn’t see an enduring trend that was worth investing in. “That’s the way we use data,” he said. “It’s really to confirm or contradict our already-prevailing hypothesis.”

Consumer packaged goods companies have been much slower to adopt this type of data than other industries, and small brands, like the one HumanCo is targeting, might not even show up in the industry-specific data like Nielsen sales numbers, for example, that are commonly used by CPGs. 

So far, HumanCo has acquired brands including Monty’s, which makes cream cheese using cashews, as well as the plant-based ice cream label Coconut Bliss. It has also debuted Snow Days, a brand designed in-house that makes pizza pockets. Karp has also raised $288 million for more acquisitions through a special-purpose acquisition company with Cavu and brought on the actress Scarlett Johansson as chief creative officer for Snow Days. HumanCo also raised $15 million through a Series A funding round it closed in January 2020.

For Karp, that’s worlds away from the professional track he was on the day he visited the prisoners in California three years ago.

“I started to feel as a professional investor that most of what I did, not all, but most of what I did was just passive investing in lots of things to make money,” he said, looking back on 2018. “There wasn’t a true purpose behind it, other than making good returns for my clients.”

With HumanCo, he believes he’s found that purpose he outlined in his email to investors nearly three years ago.

“I believe we are at an inflection point of a food and product revolution as people now recognize that the American approach to diet and disease has failed abysmally. And because of the massive economic consequences of diet and disease, it also represents one of the greatest opportunities for philanthropy, impact investments, and productive uses of capital to not only generate significant returns, but also to effect real positive change toward helping humanity get healthier.”

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